SpareBank 1 Boligkreditt issued the first EU Green Bond (EuGB) from the Norwegian banking sector last month, a €1bn seven year covered bond that SpaBol’s Eivind Hegelstad said answered a call from the debt capital markets.

The deal is only the fourth covered bond in EuGB format, with Nordea Mortgage Bank having kicked off such issuance in March.

Back in 2018, SpareBank 1 Boligkreditt (SpaBol) issued the first green covered bond backed by residential mortgages. Having issued several more green bonds based on the ICMA Green Bond Principles, the Norwegian issuer has now become an early adopter of the latest standard.

Hegelstad, CFO and head of investor relations at SpareBank 1 Boligkreditt, told The CBR that, in issuing the EuGB, SpaBol is “answering a call from the debt capital markets”.

“There’s an evolution in the definition of green bonds,” he said, “moving away from the one we had when we issued the first ICMA green covered bond eight years ago. And it’s natural for issuers who can to evolve with that standard and to be at the forefront – I think investors appreciate that.

“And we can do it relatively straightforwardly because of the simplicity of our set-up and financing residential mortgages, which avoid some of the potential complications of other asset classes. So we could do it and we wanted to do it.”

The issuer has also restricted itself to section 7.7 of the EU Taxonomy, the acquisition and ownership of buildings, thereby avoiding dealing with the challenges that building renovations can raise.

“There’s only one aspect that sort of gave us a little bit of pause,” added Hegelstad,” and that is, of course, that this is a heavily regulated product. You shouldn’t make any mistakes and if you do, you can be liable.”

SpaBol worked with Norwegian law firm Bahr, as well as Deutsche, ING and Swedbank on the project, while Moody’s provided the pre-issuance review and second party opinion, confirming alignment with EuGB requirements as well as the Green Bond Principles.

For the EuGB issuance, SpaBol uses an updated methodology for selecting EU Taxonomy-aligned green homes established by Eiendomsverdi in June. The model is the same as that used by Enova, which runs Norway’s energy performance certificate (EPC) scheme, and was in part motivated by a new and more detailed Norwegian labelling regulation coming into force in January.

Hegelstad also used an Eiendomsverdi model to address do no significant harm requirements, which in SpaBol’s case involved the physical risks residential properties are exposed to. With there being no regulatory clarity on the application of the appropriate metrics, he said SpaBol considered what other banks issuing EuGBs had done and took adopted a middle of the road approach.

The Norwegian issuer entered the market on Wednesday, 19 August ahead of a €1bn covered bond redemption on 30 August and with it having so far in 2026 tapped the euro market in March, with a €1bn six year. Hegelstad noted that SpaBol has regularly issued early in the post summer season.

“We have had some good experiences with August in the past,” he said. “People are back from their holidays and seem ready to engage. And it’s kind of a fresh market – that’s why we wanted to do it again in August this time, rather than wait until later in September when the market may be a bit more filled up and maybe more tired.”

Leads Deutsche, ING, LBBW and Nordea priced the €1bn (NOK10.8bn) August 2033 issue, expected rating Aaa, at 23bp over mid-swaps on the back of more than €3.3bn of orders, including €275m of joint lead manager interest. The spread was tightened 7bp from initial guidance of the 30bp area and the new issue premium put at zero.

SpaBol and its bookrunners estimated that having a green label attracted incremental demand of around €600m. Hegelstad noted that many investors remain happy with the ICMA label, but one lead manager suggested that demand potentially surpassed what would likely have been achieved on a comparable Green Bond Principles-based deal, with the EuGB label appearing to have broadened the investor base and supported “heftier, stickier orders”. Hegelstad also highlighted the lack of attrition in the book as final terms were set.

“We had also been thinking that the price could be 24bp, but the order book was so strong that 23bp was definitely on the cards,” he said, “and indeed we saw that when we tightened almost no one dropped – the book had been above €3.4bn and then just a tad below. Even the price-limited orders essentially stayed in.

“Is it the EuGB that ties people in? A lot of accounts who buy normal bonds also like to have a green label if it’s available.”

Split by “greenness”, dark green accounts were allocated 20% of the paper, medium green 25%, light green 11%, and conventional accounts 44%, according to the leads.

The order book included close to 100 accounts. Banks took 59% of the paper, asset managers 16%, insurance companies and pension funds 10%, central banks and official institutions 10%, hedge funds 4%, and other investors 1%. Germany, Austria and Switzerland were allocated 49%, the Benelux 20%, the UK and Ireland 9%, southern Europe 8%, the Nordics 6%, France 6%, and other 2%.

SpaBol is planning to retain the EuGB format for any future green covered bonds, rather than returning to an ICMA-only labelled green bond. According to Hegelstad, the issuer could comfortably issue another €1bn EuGB, although it is not planning to issue another benchmark in euros this year after completing its expected two for the year.

It could meanwhile look at Nordic currency issuance, including EuGBs – it already has two green bonds totalling SEK6bn (NOK5.84bn, €539m) outstanding.